Some Thoughts On Digital Media And The Future Of The Newspaper Business

[Commentary] The problem, in a nutshell, is this: A print newspaper is not just a vehicle for delivering news -- it's a vehicle for delivering a truckload of high-priced ads.

No one has any idea whether these ads are actually seen, of course, but for the $40 billion still spent on newspaper ads each year, that lack of accountability has never been a problem (in part because there was never an alternative.) What matters to newspaper advertisers is circulation--the number of folks who might -- might -- see those ads.

The print newspaper is such a good vehicle for delivering ads, in fact, that the New York Times generates about $55 per month of advertising revenue for every print subscriber it has ($650 million of annual print revenue divided by 1 million subscribers divided by 12 months). That's in addition to the $58 per month the New York Times induces subscribers to pay for the daily print ad-delivery vehicle ($700 million of annual circulation revenue divided by 1 million subscribers divided by 12 months). The New York Times web site, in contrast, only generates about $0.70 of ad revenue per month from each of the 18 million people who visit it--and zero (ZERO) circulation revenue.

As print circulation declines, the print newspaper becomes a less-miraculous vehicle in which to deliver ads--because fewer people might see them. Just as bad, as circulation declines, the cost of printing and delivering each newspaper goes up (thanks to the loss of economies of scale). Eventually, the cost of writing and printing and delivering the print newspaper more than offsets the revenue that can be generated from the print-based ads, and the print paper collapses. That's why the newspaper business is "all about circulation."